Oil prices move further upward

OPEC is pumping and USD is up but Oil doesn't care

Moves in the commodities space were muted on Thursday, despite the news headlines around oil after Brent crude futures topped the $80 per barrel mark for the first time since 2014.

Brent crude oil, the worldwide benchmark, traded up 0.91% to $80 per barrel on Thursday, or almost 10% above the level at which traders started paring bets that oil would rise.

By 1125 BST the price of Brent crude rose to $79.86 per barrel, around a three-and-a-half year high.

Oil prices have been on an upward trend since US President Donald Trump's decision on 8 May to pull out of a nuclear deal with Iran, casting a cloud of uncertainty over oil exports from Opec's third largest producer.

In addition, the high oil prices prompted the IEA to increase supply growth estimates for non-OPEC member producing countries, particularly the U.S. Brent crude is edging towards $80 per barrel as United States stockpiles fall and amid worries of potential oil supply disruptions from Venezuela and Iran.

"In Venezuela, the pace of decline of oil production is accelerating and by the end of this year output could have fallen by several hundred thousand barrels a day", the IEA said.

"It means that OPEC oil becomes that much more necessary", he said. While European buyers flag concerns over the financing issues of trade with Iran as a potential stop to buying Iranian crude, China is reassuring Tehran that it will continue to import its oil.

Oil's rise could meanwhile further push up inflation, impacting growth by quickening the pace of expected increases in interest rates.

ANZ said the falling US inventories were "raising concerns of tight markets heading into the USA driving season", during which demand typically rises.

"In these early days, there is understandable uncertainty about (the) potential impact on Iran's oil exports" from the U.S. move, it said.

Still, even more cautious analysts admit that the OPEC+ production cut deal has served its goal and global oil supply is a lot tighter than it was just two years ago.

"I expressed my concern about rising prices of crude oil and its negative impact on consumers and the Indian economy and reiterated the need for stable and moderate crude oil prices", Pradhan said.

The bottleneck in North America likely contributed to a 4.9 million barrel rise in USA crude oil inventories, to 435.6 million barrels, that the private American Petroleum Institute reported on Tuesday. This may well have been the case in past decades, where a spike in the price of crude oil would be directly linked with some sort of spike in consumption levels and as such a spike in industrial production. Tightening supplies and strong demand is providing the support.

"While the sharp rise in United States production and rig count has raised questions on the sustainability of inventory draws through 2018, we believe that inventories will continue to draw as we enter the summer driving season in 2018", they said.

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